The federal financial-regulations reform signed into law last month will create a new agency with the power to restrict consumer-credit lending, but much of the power to regulate title and payday loans will stay with the states.

That's because the new Bureau of Consumer Financial Protection won't have the power to cap interest rates on payday and title loans, says the Center for Responsible Lending, a consumer-advocacy group

That isn't good for residents of Missouri, where lenders can play footloose with weak state laws, consumer advocates say.

In contrast, other states are capping interest and sometimes going further. Wisconsin recently made title loans illegal, and the Wall Street Journal reported last month that at least eight other states have curtailed the title-loan industry since 2007.

Among them is Illinois, which last year required that new title loans be entered into a state database for approval.

To get the green light from regulators, Illinois lenders must limit loans to $4,000 and forbid multiple loans to the same borrower. Loans can be renewed only if the principal is paid down by 20 percent.

And Illinois borrowers can't qualify for a title loan if payments top 50 percent of their gross monthly income.

Those reforms don't sit well with the American Association of Responsible Auto Lenders, a title-loan trade group formed in 2008. It maintains that title loans are a valuable tool for consumers with poor credit or others with an immediate and unforeseen need for cash.

The group endorses bans on prepayment penalties, and it says lenders should give plenty of notice before seizing a borrower's vehicle. It supports the idea of principal-reduction requirements, just not those on the books in Missouri or Illinois.

"Any mandatory principal reduction requirement in excess of five percent is not consumer-friendly, making monthly payments too high for most customers and forcing a higher default rate," said Katie Grove, a board member of the group and the director of government relations for Atlanta-based TitleMax.

TitleMax, with 42 locations in Missouri, doesn't use the state's title-loan law to lend. Instead, it offers installment loans.

Diane Standaert, a lawyer with the Center for Responsible Lending, said it was not unusual for consumer-credit lenders to seek regulatory shelter under state financial laws that weren't written with them in mind.

But she said that no state rivaled Missouri when it came to the success of the title-loan industry at avoiding laws specifically intended to regulate their products.

"Missouri is a first," she said.

The irony, Standaert said, is that — despite the principal-reduction requirement — Missouri's title-loan law is relatively weak compared with other states'. It doesn't cap interest at all, let alone at the 36 percent APR favored by her group.

"But car-title lenders are still going out of their way to evade a law that gives them a lot of freedom," she said.